President-elect Donald Trump’s transition team is moving forward with plans to eliminate the $7,500 tax credit for electric vehicles (EVs). This credit has been a staple of American EV policy since the George W. Bush administration. The decision to remove it could have a significant impact on the EV market, benefiting some companies like Tesla while potentially harming others that are struggling with profitability.
According to reports from Reuters, the Trump transition team is working on a tax bill that would include the removal of the $7,500 incentive for EV purchases. This move is being supported by Tesla, the leading EV manufacturer in the country, as CEO Elon Musk has close ties to the Trump administration. The decision to eliminate the tax credit is driven by members of Trump’s energy-policy transition team who have strong connections to the oil industry.
It’s important to note that Trump cannot eliminate the tax credit through executive action and would need the support of Congress, which currently has a Republican majority. The move to remove the credit is part of a broader tax plan that aims to extend tax cuts implemented during Trump’s first term. The Alliance for Automotive Innovation, an auto industry trade group, has expressed concern about the potential elimination of the tax credit, as it could impact the growth of the EV market.
While Tesla stands to benefit from the removal of the tax credit, other automakers such as Ford and General Motors, who are still struggling to make a profit on electric vehicles, could face challenges. Startups like Rivian and Lucid, which have yet to turn a profit, would also be negatively impacted. The elimination of the tax credit could slow down the growth of EV sales in the U.S., as EVs are still generally more expensive than traditional gas-powered vehicles.
The decision to cut the tax credit could also have implications for investments in domestic battery and EV manufacturing, which have been on the rise since the Inflation Reduction Act was passed in 2022. The law includes provisions that incentivize the production of EVs in North America and promote battery sourcing from domestic suppliers. These investments, particularly in red and purple states, could help sustain the EV tax credit despite potential changes in policy.
In conclusion, the elimination of the $7,500 tax credit for EVs could have far-reaching effects on the EV market in the U.S. While Tesla may benefit from this decision, other automakers and startups could face challenges. The impact on EV sales growth and investments in domestic manufacturing remains to be seen as the transition team continues to work on its tax plan.
Contact the author at tim.levin@insideevs.com for more insights on the auto industry or securely on Signal at Tim_Levin.62.